Everyone heads to court...
Once and for all...??? Doubt it...
((HT: AJC via Howard Bloom))
A court document from Hawks and Thrashers co-owner Steve Belkin probably says it best:
“At this time, the parties dispute all issues in this case.”
Belkin is suing his seven business partners — four who live in Atlanta and three who are in the Washington, D.C., area — over how much his 30 percent stake in the teams and Philips Arena’s operating rights are worth. The owners want to buy out Belkin, who lives in Boston, but the contract that spells out that process is so vague that they haven’t been able to agree on a process or a price.
The dispute will come to a head Tuesday in Montgomery County, Maryland, Circuit Court. It will be up to Judge Durke Thompson to make sense out of the contract and decide whether it’s Belkin or the seven other partners who can select the next appraiser to place a value on the teams and arena operating rights.
The trial, which is expected to last about two weeks, is in Maryland because the owners previously agreed to litigate there. Each side has the right to appeal the judge’s decision, which could drag the already protracted legal process on for another nine months to a year, leaving the ownership of the teams in limbo yet again.
In the long run, the decision could affect whether the group known as the Atlanta Spirit will be able to financially support two professional teams. According to recent court documents, the Spirit has lost more than $174 million since the 2002-03 season, including $50 million in the past two years alone.
Neither the owners nor their attorneys would comment for this story. In the past, the owners have denied that a team would be sold.
But sports business experts say that the viability of the Thrashers is in doubt.
“Maybe we need to revisit these things as to why we put hockey there,” said Bill Sutton, associate department head of the DeVos Sport Business Program at the University of Central Florida, referring to Atlanta and other nontraditional hockey markets.
How it hurts
The uphill battle in Southern markets is not helped by multimillion-dollar ownership feuds.
“The ownership situation is not, you know, the model for running a franchise — to have the owners fighting like that,” said Glenn Wong, an attorney and professor at the University of Massachusetts’ department of sport management.
Sports-business consultants say ownership fights have existed as long as pro sports teams have. That doesn’t mean the issues will automatically spill onto the court or the ice. But the more high-profile the issue, the more owners should worry about fans becoming disenfranchised.
“It can be detrimental if the current ownership discussion becomes so pronounced that it forces the fans to collectively roll their eyes and not want to be engaged in the team,” said David Carter, director of the Sports Business Institute at the University of Southern California. “That’s where the owners would have to take a look at what is the damage done to potential revenue generation as to how this is playing out.”
Each side claims the other owes it millions.
The Atlanta and D.C. owners want Belkin to pay $25.8 million they say he hasn’t paid to cover team expenses since their legal fight began in August 2005, according to a pretrial hearing document, one of few that is publicly available.
For his part, Belkin contends he hasn’t had to pay since the buyout process began, court documents say. He wants the other owners to pay $142.8 million, plus interest as well as legal costs. That’s the amount he says they owe him for his share in the teams based on an appraisal by J.P. Morgan that is now a key part of this trial.
How it all began
The owners bought the teams from the Atlanta-based Turner Broadcasting System in 2004. The honeymoon lasted a couple of months, but soon they were fighting over petty things, such as who would get the best seats at the NBA All-Star Game. The arguments came to a head in 2005 when Belkin, the Spirit’s representative to the NBA, tried to block a trade of then-Phoenix Suns guard Joe Johnson.
The owners eventually signed Johnson, and Belkin agreed to step down as the Hawks’ NBA governor — and to have the others buy out his 30 percent stake. The price was to be set by up to three appraisals, and he was allowed to hire the first one.
Belkin selected CitiGroup Private Bank to determine a price of the teams and arena rights. From the start, the seven owners accused Belkin of trying to “hijack” the appraisal process. But court documents outline interference from both sides.
The seven other owners “began to threaten Citi, both orally and in writing: ‘when Steve is long gone, you will have to live with us and yourself … please remember that …’ ” documents from Belkin’s attorneys said. They also “plotted to get ‘word on the street … that Belkin … is never going to get back into sports,’ and that ‘Belkin will never own another professional sports team,’ ” documents said.
For his part, Belkin hired Game Plan, a Miami Beach-based banking and consulting firm for the sports and entertainment industry, to assist with the process, court documents from the other partners said. Belkin agreed to pay Game Plan more money if CitiGroup’s valuation of the teams “exceeded specific thresholds,” the documents said.
Whichever side objected to CitiGroup’s findings would be able to pick a second appraiser, the contract said. But the contract didn’t say what would happen if both sides objected — which is exactly what happened.
According to court documents, it was clear that both Belkin and the seven other partners planned to object to whatever value CitiGroup assigned the teams. For example, Atlanta-based co-owner Michael Gearon Jr. peppered CitiGroup with phone calls to find out exactly when the appraisal would arrive. He then left two signed objection letters with his attorney before going to Sea Island for the Thanksgiving holiday.
That same morning, Belkin’s business partner began checking his e-mail every 15 seconds for the appraisal and told his assistant to stand by the fax machine with a prepared objection letter in hand.
CitiGroup e-mailed a 69-page valuation, giving the teams and arena rights a fair-market value of US$288.4 million. This meant Belkin’s share was worth about $90 million. Belkin faxed an objection one minute later. The other partners sent in their objection 12 minutes after Belkin had submitted his.
Both sides claimed the right to pick the second appraiser. Belkin argues that the choice is his because he objected first. The others say his argument is wrong, that the process did not involve a “race to object” and that they should be able to pick the next appraiser.
Belkin went ahead and hired J.P. Morgan. It assigned a value higher than CitiGroup, providing Belkin the rationale for his $142.8 million claim. The other owners want that appraisal thrown out.
Tuesday’s trial is the second time the issue has been through the Maryland courts. Previously, a Maryland circuit court judge ruled that Belkin had the right to choose the second appraiser. The judge also ruled that the other owners missed the deadline to pay the price set by his second appraisal, and therefore Belkin was entitled to buy them out at cost.
The appellate court overturned that decision and sent the case back to the lower court, where the process is starting over again.
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